Growth Stocks
Although growth stock picks can be highly volatile, they can make good long-term investments. They may be well-known stars or quiet gems, but they do share one common attribute—they are growing at a higher-than-average rate within their industry, or within the market as a whole, and could keep growing for years or decades.
And keep in mind that we focus on growth stocks, which have a good long-term history and favourable prospects. We downplay momentum stocks that tend to attract many investors simply because they are moving faster than the market averages, but are liable to fall sharply when their momentum fades.
There’s room for growth stock investing in your portfolio, but make sure you follow our TSI Network three-part Successful Investor strategy for your overall portfolio:
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
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Growth Stocks Library Archives
WESTJET AIRLINES $12.56 (Toronto symbol WJA; SI Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 138.8 million; Market cap: $1.7 billion; No dividends paid) reported that its revenue rose 7.4% in the three months ended March 31, 2010, to $619.8 million from $579.3 million a year earlier. Earnings per share fell 55.5%, to $0.12 from $0.27, mostly due to one-time expansion costs at WestJet Vacations, plus higher fuel costs. WestJet’s load factor hit 78.2% in June 2010, up from 72.9% in June 2009. The load factor is the portion of available seats that are occupied by paying passengers. It increased even though WestJet added 10.9% to its passenger capacity. Revenue passenger miles (the total of paying passengers on all flights, multiplied by distance travelled) rose 19% this year from June 2009....
In response to the BP oil spill in the Gulf of Mexico, the Obama administration has banned some offshore operations in the region. The ban, which is being challenged in court, affects oil and gas companies and firms that operate, service and supply drilling rigs. To cut your risk, we recommend focusing on service companies that mainly operate onshore, like Pason Systems and Pulse Seismic. PASON SYSTEMS $11.06 (Toronto symbol PSI; SI Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 81.5 million; Market cap: $901.4 million; Dividend yield: 2.9%) rents equipment that its customers use to monitor and manage land-based oil rigs. It also sells communications systems, such as its satellite system, which companies use to remotely collect data from their drilling operations. The company serves oil and gas companies and drilling contractors throughout Canada, the U.S., Mexico and Argentina. In the three months ended March 31, 2010, Pason’s revenue rose 4.1%, to $56.4 million from $54.2 million a year earlier. Cash flow per share climbed 8.7%, to $0.25 from $0.23. In late 2009, Pason bought Petron Industries, which makes instruments for both onshore and offshore drilling rigs. Pason paid $18 million U.S., plus $7 million U.S. over three years conditional on rising offshore revenue. Petron will add to Pason’s onshore customer base in the U.S., and let it expand its services to offshore rigs as that market recovers....
MAJOR DRILLING $22.40 (Toronto symbol MDI; SI Rating: Speculative) (www.majordrilling.com; 1-866-264-3986; Shares outstanding: 23.8 million; Market cap: $532.9 million; Dividend yield: 1.8%) reports that its revenue jumped 46.6% in the three months ended April 30, 2010, to $97.4 million from $66.4 million a year earlier. The company earned $3.2 million, or $0.14 a share. A year earlier, it lost $4.6 million, or $0.19 a share. Its cash flow was $9.4 million, or $0.40 a share, in the latest quarter. Major Drilling expects to see continued strong results throughout 2010. That’s because gold is trading near all-time highs. As well, base-metal prices should move higher as the global economy and commodity prices continue to rebound. Major Drilling is still a buy.
The BP oil spill in the Gulf of Mexico will probably lead to greater regulation of offshore drilling. That would hurt the profits of offshore oil and natural-gas producers. However, it should enhance the value of safer onshore oil and gas deposits. Cimarex and Devon focus on onshore oil and gas. They also trade at reasonable multiples to their forecast cash flows. As well, both have low debt and steady development spending. That puts them in a good position to prosper, even if natural-gas or oil prices falter. DEVON ENERGY CORP. $62.67 (New York symbol DVN; SI Rating: Speculative) (405-235-3611; www.devonenergy.com; Shares outstanding: 446.9 million; Market cap: $28.0 billion; Dividend yield: 1.0%) is one of the largest U.S.-based oil and natural-gas explorers and producers. Its production mix is 68% gas and 32% oil....
AEROPOSTALE INC. $29.17 (New York symbol ARO; SI Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 93.5 million; Market cap: $2.7 billion; No dividends paid) reports that its June same-store sales rose 8% from a year earlier. The company’s low prices and popular styles were the main reasons for its strong performance. For the five-week period ended July 4, 2010, total sales (including new stores) were $186.8 million. That’s a 14% increase over the same period a year earlier. Aeropostale’s profit margins rose, as well, so it’s getting the full benefit of the higher sales. Unlike many clothing retailers, it’s not boosting sales by selling discounted merchandise. Aeropostale is still a buy.
FIRSTSERVICE CORP. $21.69 (Toronto symbol FSV; SI Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 28.9 million; Market cap: $627.0 million; No dividends paid) serves the following areas of the real-estate market: commercial real estate; residential property management; and property improvement. FirstService has more than 17,000 employees worldwide. FirstService’s revenue rose 11.6% in the three months ended March 31, 2010 (all figures except share price in U.S. dollars), to $402.4 million from $361 million a year earlier. Excluding one-time items, earnings per share jumped 87.5%, to $0.15 from $0.08. Cash flow jumped to $0.35 a share from $0.02 a share. The big gains in earnings and cash flow came from a turnaround in results in Firstservice’s commercial real estate division. The improving economy pushed up revenue at that division by 30% in the latest quarter, to $154.1 million....
THE CHURCHILL CORP. $18.02 (Toronto symbol CUQ: SI Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.5 million; Market cap: $441.8 million; No dividends paid) has completed its $180-million share and debenture issue. The funds will help pay for its $380-million purchase of Seacliff Construction. Seacliff provides general-contracting, electrical contracting and earth-moving services, mostly in western Canada. Aecon Group (Toronto symbol ARE) bought three million of Churchill’s new shares. It also bought existing Churchill shares in the open market. Together, these purchases give it a 14.9% stake in Churchill. Aecon is one of Canada’s largest construction and infrastructure-development companies. Aecon hopes the investment will let both companies explore areas of mutual interest. However, it says it does not intend to acquire control of Churchill....
NORTHGATE MINERALS CORP. $3.13 (Toronto symbol NGX; SI Rating: Speculative) (604-681-4004; www.northgateminerals.ca; Shares outstanding: 290.9 million; Market cap: $910.5 million; No dividends paid) is focused on building a mine at its Young-Davidson gold property in northern Ontario. The $339-million mine, which would produce 180,000 ounces of gold per year, is scheduled to start up in 2012. After two years, its production would rise to 190,000 ounces. Northgate also owns the Kemess South open-pit gold/copper mine in north-central B.C. However, it expects to exhaust this mine’s reserves by late 2010....
IAMGOLD $16.84 (Toronto symbol IMG; SI Rating: Speculative) (1-888-464-9999; www.iamgold.com; Shares outstanding: 371.8 million; Market cap: $6.3 billion; No dividends paid) has started production at its Essakane gold mine in the west African country of Burkina Faso. The $350-million mine will produce 315,000 ounces of gold a year. That will raise IAMGold’s annual production by about 25%, to over one million ounces per year. Operating in Africa always involves some political and economic risk. However, Burkina Faso is a relatively stable country. As well, the government of Burkina Faso holds a 10% interest in the Essakane mine. IAMGold owns the other 90%. IAMGold is a buy.
SYMANTEC CORP. $14.59 (Nasdaq symbol SYMC; SI Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 798.9 million; Market cap: $11.7 billion; No dividends paid) has signed a multi-year extension of its agreement with Hewlett-Packard to distribute its Norton Internet Security software. Norton Internet Security is a set of programs that fight hackers, viruses and other online threats. Under the deal, Hewlett-Packard will continue to preinstall a 60-day free trial subscription to Norton Internet Security on all of its personal computers, laptops and netbooks. Users can then buy a subscription to Norton Internet Security for $54.99 a year. Deals like this are very important for software sellers like Symantec. That’s because many consumers like the convenience of buying preinstalled programs right from their computers....